New builds and Basel II fuel IT demand

Helen Deacon, managing consultant at JM Selection, says the IT recruitment market is gearing up for the busiest spring in years.

"By the end of March, all bonuses that are going to be paid will be in the bank and IT developers will be looking for new challenges," Deacon says. "The market is more buoyant than in past years. With banks signing off budgets for new projects, there is already a demand for staff to build new trading systems and the infrastructure needed to support them."

She adds that there is a greater focus on trading systems to support more complex types of trades. This time a year ago, IT jobs tended more towards programmers rather than developers.

Morgan Kavanagh, director at Huxley Associates, says that the real upturn began as early as last April. He says: "Budgets had been squeezed for a long time, but since last April growth has been steady. Candidates have a different attitude now - keen to drive their careers forward and get a better deal, whereas before last year, they were grateful just to have a job."

The trading rooms of the banks and brokers are considered mission critical and have escaped the general trend towards outsourcing and buying in managed services for certain projects. The large majority of tier-one banks have built their own systems for derivatives trading in-house, and even where they do buy additional systems, they maintain onsite IT staff to customise, integrate and maintain them.

Kavanagh agrees that the revenue generating areas within banks are fuelling this new activity. "Expertise in building trading and risk management systems for the front office is the most-sought after, although we have seen demand in the last few years for the specific skill set needed for Basel II compliance systems," he says. "Most banks already have a group of people working on this now. Basel II, like Y2K, was a specific market event."

The introduction of Basel II, the new regulatory requirement in force from 2007, has also created new budget requirements in IT. Dresdner Kleinwort Wasserstein is just one of many banks searching for developers in this new area of expertise. The bank is advertising for staff that can "enhance and customise credit risk management and Basel II systems."

At the same time, Raft International, the London-based risk management vendor, is also recruiting an operational risk management product specialist.

Much of the Basel II preparations to date has focused squarely on the requirements for credit risk. However, the new regulation will also require banks adopt advanced models for monitoring and calculating their exposure to operational risk. Banks intending to use the advanced model to lower their capital requirements should already be collecting loss data, and should be ready to run their advanced models in 2006, so they can run them in parallel with the standard approach for one year.

SunGard, one of the largest providers of risk management systems, only released an operational risk management module of its Basel II software in November 2004 as banks began taking the deadline seriously last year.

David Rowe, group executive vice-president for risk management at SunGard, says, "There is nothing like supervisory mandates that effect the numbers to get the attention of the banks."

"Most banks, once they became convinced that Basel II was going to happen, began setting up the procedures needed to capture operational risk data, Rowe says. "Now they need systems to analyse this data."

And now banks need developers to keep those systems running at speed or risk slowing the bottom line down.